I saw an interview of a group of young men from North Africa who had entered Italy illegally and were now on their way to Northern Europe in search of work. This got me thinking about the free market forces at work drawing labor from lower paying to higher paying locations and how these forces are not dissimilar to forces in nature.
There is a scene in an old movie “Network” that supports this notion. The story line is as follows: A TV newscaster goes off the deep end and starts ranting and raving against the corporate establishment and as a result gains a large following. (There is a scene that is often repeated where his audience is asked to open their windows and shout ,“I’m mad as hell and I am not going to take it any more”). The ratings are skyrocketing and the network management is delighted but the company that owns the network is displeased with the attack on corporations. The chairman of the board calls the newscaster into a meeting, sits him down at the end of a long table in a darkened board room and after a few polite exchanges, assumes a very loud and angry “preachers” tone and scolds him. The chairman’s point is that economics follows the laws of nature, which the corporations adhere to and how dare he interfere with nature. The newscaster is convinced and tones down the rhetoric and starts arguing the corporate case. His rating plummet and the network management wants to take him off the air but corporate refuses. At a network meeting the management was beside themselves searching for a solution when someone in passing suggest killing him. The suggestion gains traction and they arrange to have the newscaster shot on air by a radical.
As forces in nature seek equilibrium so do market forces. The entire system is based on the premise that like liquids and gasses that are drawn toward regions of lower pressure until equilibrium is achieved so are labor and capital. Capital seeks the greatest potential for profit and as more is drawn in competition rises, profits decrease and capital looks for better opportunity. The same can be said for labor. In a particular region or industry where labor is scarce, prices are high and people are drawn into them. The young North Africans demonstrated an expression of true free market capitalism. They were drawn from poor areas into wealthier ones. The problem for the wealthier areas is that this influx can bring down demand and subsequently wages. The exodus of labor from an area reduces the supply and given there is a demand, causes an increase in wages. Left undisrupted, there is an equilibrium reached unless there is a growth in demand in the rich areas not sufficiently satisfied by the influx.
Man can and does intervene both in the case of “nature” and markets. Dams are built to constrain the natural flow of water. The larger the difference in the levels of water on either side of the dam, the greater the pressure differential and the larger needs be the dam. As in the case of water where larger differences in levels require larger dams, greater differential in standards of living require higher fences and greater number of border guards. As the gap grows, eventually the force becomes so strong that there are no fences high enough to stem the flow and as in ancient history, the hoards from the north attack Rome. Outside martial conflict or very high fences, the options are to either improve the lot of the poorer areas or lower the standard in the wealthier ones.
The free market unconstrained, knows no boundaries, ethnicities or religions. Governments in their role as custodians of the “well being” of their societies, much as they construct dams for their constituencies benefit so they enact policies restricting the flow of labor. I find it interesting that the conservatives, with the exception of Libertarians, supposedly the guardians of free markets, are the biggest proponents of tough immigration laws. This certainly is a call for more government intervention. Ultimately the difference between liberals and conservatives is not more or less government but the “sacred cows” the different constituencies want government to enhance, protect or eliminate. A good government is one that institutes policies that benefit its society as a whole while doing so within the guidelines set forth by its constitution and not sub-optimize the whim of a segment even if it is a majority.
Thursday, May 26, 2011
Free Market Forces as a Part of Nature
Posted by PoliticAli at 7:21 PM
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2 comments:
hi politicali, yet another great post
I believe politics has become about fighting for ideology more than it has become about running society. At least the part we get from the media.
I was just watching a newscast last night listening to a conservative talk about medicare and it became apparent to me the question isnt really about the service, its about who and when its paid for. The thought is that removing the funding for the service would put more onus on individuals, and thus, incentivize more responsible savings. The problem is of course the market system also incentivizes against longer term priorities. The perfect example of this was even made clear by Obama in the explanation of a recent payroll tax cut in that the intent was to increase consumer spending (no mention of more responsible saving or planning for retirement). In other words, the goal is simply to avoid having to pay for retiree health care for now, but without any thought to how those retiree needs will actually be met. This is almost the identical approach being taken toward pension 'reform'.
Obviously, society still needs to run (and be funded) and those things tend to happen almost independently of the rhetoric surrounding political philosophy.
I also dont believe truly natural processes jibe with the human psyche. There are many brutal and pseudo-immoral things that happen in nature and you're right, we absolutely do intervene when we have a problem with them (both in nature and in economics/politics). Interestingly, I even think there are sometimes processes that are analogous to monopolies in nature, though they often lead to the total destruction of that sub-system.
On a semi-related note, I have recently been thinking about another apparent contradiction in conservative philosophy and that is the tendency toward ideology over pragmatism. Liberalism, for me, has always implied openness and discussion and inclusion of varying viewpoints (though it may not have always been simply about that), while conservatism seems to generate more of a principle-based idealogue. I was recently reading something on education and was struck by the claim that democracy cannot be successful without a culture of argument and debate. While I believe some 'conservatives' very much believe the same, I think they are few and far between. There was a rift between william f buckley jr and ayn rand that epitomizes the demagogue conservative from the culture of debate conservative, imho. I feel in our current environment (at least wrt the media) the former seems to have clearly won out. I said above that I saw this as a contradiction, but I haven't yet hashed out for myself whether that is really the right word. Demagoguery does feel counter-productive, and from that standpoint it should contradict the desires of a functioning society.
Hi Navigio; good to hear for you as always.
You are right that politics has become a fight over ideology. A prime example of this is the pledge Grover Norquist is requiring Republicans to sign not to raise taxes under the threat of being “primeried out by true ideologists. So if the well being of the Nation required increased taxes they are pledging to sacrifice the Country for the ideology. I remember when Rudi Guliani was running for President all Republican candidates were asked to sign a pledge also (it may have been the same one). Rudi declined because he said that the only pledge a President makes and should make is to uphold the Constitution, a rather brave position.
In Obama’s defense, there was indeed a short-term crisis that required an influx of money into the market. Savings, though a long term benefit would have a negative impact on the state we were in. The debate should be about what do we as a society desire and how can we achieve this and pay for it and what is the role of government in the quest. Do we give someone who has worked all their lives in a drab factory an opportunity to spend a few last years while they still have their health to enjoy life? The conservative position is that they should set money aside for retirement. If they are having difficulty just making ends meet, how can they?
You make an interesting point about monopolies in nature. Hadn’t thought about that. Maybe man is an example of one of these that ultimately works toward the detriment of the organism (the world) as a whole. As to the human psyche, I think the act of civilizing is to restrict human nature, its good and bad (hopefully more of the latter) with governments being the instrument of this restriction. Activities which are driven by instinct that are perceived, rightly or wrongly to be a detriment to society; murder, theft; rape, nudity, speeding, driving on the left side of the road, etc. become prohibited. Natural tendencies not viewed as negative; eating, procreating (under some circumstances) wearing white after Labor Day, etc. are not. Though the prohibitions vary greatly among societies, all, from the most primitive to the most modern have them and those of others always look ridiculous.
I think you are right in your observation about ideology over pragmatism and openness (though the “political correctness” at universities on the part of liberals is troubling). I believe this may stem from the fact that conservatives, though today there are many different types often with contradictory points of view, want to maintain existing centers of influence. Progressives on the other hand, are looking to change entrenched structures, sometimes radically.
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